Brazil manufacturing sector expands slightly in March: PMI

SAO PAULO (Reuters) - Brazil’s manufacturing activity expanded for the fourth straight month in March, though at a meager pace as growth in new orders cooled, a private survey showed on Tuesday.

The HSBC Purchasing Managers’ Index for the Brazilian manufacturing sector rose to a seasonally adjusted 50.6 in March from 50.4 in February. The 50 mark separates contraction from expansion.

The new orders index fell to 50.7, its second straight decline after hitting an 11-month high of 52.4 in January. Incoming new work was centered on intermediate goods producers, the survey showed.

Output expanded for the seventh straight month, mostly due to new contract wins and capacity expansion.

High labor costs, poor infrastructure and a hefty tax burden still weigh heavily on Brazil’s manufacturers, whose lackluster performance has weighed on the nation’s economic growth.

Brazilian industrial production is expected to expand just 1.38 percent this year, according to a central bank poll released Monday, down from a 1.8 percent growth forecast a month earlier. Economists in the poll predict economic growth to come in at 1.69 percent in 2014.

Despite the pessimistic outlook, Brazilian manufacturers took on more employees for the second straight month, the PMI data showed.

“Firms signaled the fastest growth in payrolls in 12 months - a surprising development considering the overall weakness of the economy,” said Andre Loes, chief Brazil economist at HSBC.

Prices for manufacturing inputs such as raw materials expanded at the fastest pace in five months, with some respondents pointing to the effects of an unfavorable exchange rate on import costs.

Despite a fiercely competitive environment, manufacturers passed some of their higher costs onto customers in March, with the output price index reaching its highest since November.

Input prices have risen continuously since September 2009, while output prices have climbed for more than two years, the index showed.